Sunday, June 03, 2007
Why Mergers and Acquisition fail…How to prevent them?
At lot is being seen in this space these days.. Many companies are going global and expanding. Although Mergers and acquisitions (M&A) is popular means of increasing and protecting market share, the strategy does not always deliver what is expected in terms of increasing profitability or economies of scale. The key objective is to achieve synergies or what is commonly referred to as the 2+2=5 effect. We can fairly remember the great mergers which lacked one or more integral elements for effective mergers. Those were:
BankAmerica with Security Pacific
HP and Compaq
On the other side HLL & TOMCO –A successful one
Having seen the above case, have several distinguishing features, certain reasons for a M&A resulting in a failure can be identified. They are :
1. Hurriedly developed integration strategy.
2. Cultural clash between two entities.
3. Lack of scientific approach to manage post integration issues like organizational structure.
4. Leadership gap at the top.
5. Loss of key talent.
6. Failure to address individual level issues related to morale loss.
7. Lack of corporate communication plan for all stakeholders concerned.
Workable Solution-
Bicultural Audit and Strategies to merge different organizational cultures.
Organizations that ignore cultural aspects, face complexities that can kill the deal even though the deal might pass all financial, marketing and Operational aspects during due diligence. It is hence for the business engaging in M&A process integrate framework with merger plan to achieve desired M&A outcome.
Posted by "CPerformance" ::
2:33 PM ::
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